Sum Certain: Cashflow Projections Build Confidence for Lawyers

Law firm revenue usually has an ebb & flow to it, especially when you talk about firms that rely on hourly billing.  Most attorneys would probably say that their revenue is pretty unpredictable. 

 

The only problem with that thesis is that it’s not entirely true.  Law firms can design some assumptions about what they’ll make by utilizing revenue projections.  Compare that to historical data, and you’re bound to find trends (and, likely, seasonality), as well as recurring themes around how and when you make money. 



And, you don’t have to do it on your own.  If you utilize an accountant, bookkeeper, or (fractional) chief financial officer (CFO), you can ask that person to develop ‘cashflow projections’ for you; and, you can do that on an annual basis, at the start of every new year.  The more you do that, the more accurate those projections will become. 

 

Lots of law firms I talk to will say they’re having a bad month, from time to time.  And, the followup question is always: ‘Compared to what?’  If you think you’re having a bad August, is that really true, compared to what you did August of last year, or the year before that? 

 

In the end, when law firms generate cashflow projections and compare them to actual cashflow, firm owners can gain fresh confidence around their finances.  If you understand your cashflow at depth, your revenue models become more predictable and accessible, over time. 

 

. . . 

 

Do you need to ask more (and better) questions about your finances?  We can help. 

Through a unique partnership between the Maine Board of Overseers of the Bar and Jared Correia’s Red Cave Law Firm Consulting, Maine attorneys have access to experienced law practice management consultants at a special discounted rate. 

To get started, visit Red Cave’s landing page for Maine attorneys, and start running your law practice like a business.

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